Student Loan Collection and the CFPB

Transcription

1 Student Loan Collection and the CFPB Consumer Financial Protection Bureau o Generally! Established under Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C et seq.)! Purpose: The Bureau shall seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent, and competitive. 12 U.S.C. 5511(a).! In addition to its authority over covered banks and financial institutions, the Bureau has authority over certain nonbank covered persons for purposes of assessing compliance with federal consumer financial law, to obtain information about activities and compliance procedure, and to detect and assess risks to consumers and consumer financial products. 12 U.S.C The Bureau s supervisory authority extends to larger participants of a market for other consumer financial products or services. See id.; see also 12 C.F.R o Student loans! Under 12 U.S.C. 5514, the Bureau has always had supervisory authority over nonbank covered persons servicing private education loans.! Under its authority to regulate larger participants, CFPB enacted a rule amending 12 C.F.R to expand regulation to include the servicing of both private and federal student loans. 12 C.F.R became effective March 1, 2014.! The regulation defines student loan servicing to include covered persons that (1) receive loan payments or notification of payments and apply those payments to the borrower s account pursuant to the terms of the loan or contract governing the servicing of the loan; (2) maintain account records and communicate with borrowers on behalf of loan holders during periods when no payments are required; or (3) interact with borrowers, including activities to help prevent default, to facilitate activities described in (1) and (2). 12 C.F.R ! Larger participant includes any nonbank covered person that has an account volume exceeding one million. 12 C.F.R o CFPB Student Loan Findings (CFPB Supervisory Highlights, Fall 2014)

2 ! Findings based on CFPB examinations of covered student loan servicers; examiners identified unfair, deceptive, or abusive acts or practices Partial payment issues: Servicers allocating partial payments among across all of a borrowers loans in a way that would maximize late fees Misrepresentations on billing statements: Servicers inflating minimum balance due on periodic statements Improper late fees: Servicers charging late fees when payment made by borrower during grace period Inaccurate tax information: Servicers requiring additional certifications regarding use of loans for higher education purposes and withholding 1098-E if borrowers did not supply those certifications Misrepresentations regarding bankruptcy: Servicers telling borrowers that student loans are never dischargeable in bankruptcy Improper telephone communications: Servicers autodialing borrowers early in the morning or late at night; examiners determined this to be harassing behavior o Private Student Loans! In a report to various Senate and House committees in 2012, the Director of the CFPB made the following recommendations regarding private student loans: Require school certification of private student loans Consider changes to treatment of private student loans in bankruptcy Clarify definition of private student loan for TILA purposes Provide mechanisms for borrowers to understand clearly their student loan obligations Determine whether more data is needed to enhance consumer decision-making and lender underwriting! Complaints Co-signer releases not being honored Automatic default upon death Bankruptcy issues Federal Student Loans o Federal Family Education Loan Program (eliminated in 2010) o Direct Loans (loans come directly from government to student) o Perkins (originated and serviced by participating school) Statistics and Numbers (Source: Pounding Student Loan Borrowers, National Consumer Law Center, September 2014) o Of outstanding Direct Loans, $1 out of every $5 is past due! Total Direct Loans: $686 Billion

3 ! Delinquent Direct Loans: $89 Billion! Direct Loans in Default: $38 Billion (more than 270 days past due) o Commissions received by debt collection agencies from Dept. of Ed:! 16% on voluntary Direct Loan payments; 17.5% on voluntary Non-Direct Loan payments! 16% on payments received from Administrative Wage Garnishment for Direct; 17.5% for Non-Direct! 13% of loan balance if agency arranges to rehabilitate loan! 2.75% of loan balance if agency arranges a consolidation of loans Higher Education Act Disclosures o Only applies to federal loans (TILA applies to private loans) o Pursuant to 34 C.F.R , the Act requires a number of disclosures, including:! Before or at the time of first disbursement Lender s name Toll-free contact information Principal loan amount Actual interest rate Notice that loan may be transferred Definition of default and consequences of default Statement of rights and responsibilities! At or prior to time of repayment When repayment begins Estimated balance Repayment schedule Options in case of default, including associated fees! During repayment Bill for each installment time period including balance, interest rate, total amount of interest paid by borrower in preceding installment Toll-free contact information Other options for repayment plans o No private right of action Rehabilitation o Borrower can rehabilitate federal loans if borrower makes 9 timely payments in 10 consecutive months (34 C.F.R ) Timely=within 20 days of due date Payments must be reasonable and affordable o What is reasonable and affordable? o Can borrower really afford payment?! Income based vs. balance-based As of 2014, holders must use IBR formula to determine reasonable and affordable payment

4 Fair Debt Collection and Practices Act o Purpose: It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses. 15 U.S.C. 1692(e). o When does it apply?! Debt collector: The term debt collector means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another U.S.C. 1692a(6). Excludes Dept. of Ed employees (15 U.S.C. 1692a(6)(C)) Excludes original creditors (15 U.S.C. 1692a(6)(A)) Debt must be in default, more than 270 days (15 U.S.C.1692(a)(6)(F)(iii)) o Some examples of FDCPA claims:! Abusive language (15 U.S.C. 1692d)! Harassing phone calls (15 U.S.C. 15 U.S.C. 1692d(5))! Contacting parents, coworkers, most other third parties regarding borrower s debt (15 U.S.C. 1692b)! Misrepresenting amount or legal status of debt (15 U.S.C. 1692(3(2)(A))! False, misleading, or deceptive representations (15 U.S.C. 1692e(1)) o Remedies under FDCPA (15 U.S.C. 1692k):! Actual damages (15 U.S.C. 1692k(1))! Statutory damages up to $1k (15 U.S.C. 1692k(2)(A))! Attorneys fees for Plaintiff if proves liability (15 U.S.C. 1692k(3))! Attorneys fees for Defendant if shown that Plaintiff brought action in bad faith (15 U.S.C. 1692k(3)) Other Claims Under Federal Law o Fair Credit Reporting Act o Truth in Lending Act (but only for private loans) Statute of Limitations o No statute of limitations for federal loans (20 U.S.C. 1091a)! Does not apply to deceased student or student s estate (20 U.S.C a(d)) o SOL does apply for private loans; apply applicable state law SOL Disability Discharge as an Alternative to Bankruptcy o Permanent and total disability required (20 U.S.C. 1087)! Must apply to all loan holders for discharge of each loan

5 ! Permanently and totally disabled if unable to engage in any substantial gainful activity by reason of physical or mental impairment and the impairment: Can be expected to result in death; Lasted for continuous period of not less than 60 months or; Can be expected to last for continuous period of not less than 60 months;! Also qualifies if determined by Sec. of Veterans Affairs to be unemployable due to service-related disability (34 C.F.R ) o As of July 2010, Department monitors borrowers for three years after discharge (previous system was conditional discharge). Collecting Federal Student Loans o Administrative wage garnishment (31 U.S.C. 3720D)! No judgment required, although notice must be sent by mail to borrower and borrower can request hearing (31 U.S.C. 3720D)! 15% of disposable pay; up to 25 percent of disposable earnings (31 U.S.C. 3720D)! Can enter payment plan to avoid garnishment (31 U.S.C. 3720D) o Tax refund offsets (31 U.S.C. 3720A)! No judgment required, but loan holder must give borrower written notice (31 U.S.C. 3720A)! After receiving notice, borrower may request review in writing based on limited arguments (debt incorrect, borrower has other repayment agreement, disability, etc.) o Garnishment of federal benefits! Federal offset is lesser of 15% of monthly benefit payment or amount which exceeds $750. (31 C.F.R )! Can request review (34 C.F.R )! Includes some but not all types of federal benefits Private Loans o TILA! Disclosures (15 U.S.C. 1638(e)) (effective Feb. 2010) Must be clear and conspicuous Disclosures at time of application, approval, and final! Remedies (15 U.S.C. 1640) Private right of action Includes right of cancellation o FDCPA o SOL and Contract Defenses Other Issues o Ownership of the Note/chain of assignment

Overview of Financial Products and Consumer Protections Presented by the Consumer and Mortgage Lending Division, House Financial Institutions Committee January 23, 2014 Role of the CML Division The Consumer

Debt Collection From the Debtor s Perspective Linda Cook Senior Staff Attorney Ohio Poverty Law Center lcook@ohiopovertylaw.org 2013 Ohio Poverty Law Center A Few Facts About the Debt Burden of American

Student Loans Bankruptcy and Student Loans: Must prove undue hardship Must initiate an adversary hearing, a separate lawsuit within the bankruptcy where the undue hardship is illustrated. Most can t afford

Federal Direct Loan Terms and Conditions GOVERNING LAW The terms of this Master Promissory Note (MPN) will be interpreted in accordance with the Higher Education Act of 1965, as amended (the HEA) (20 U.S.C.

CONSUMER Information for Advocates Representing Older Adults National Consumer Law Center Debt collectors have been the most complained-about industry on the Federal Trade Commission s consumer website

Federal Consumer Protection Body of laws designed to protect the economic back bone of the country, credit. The Congress finds that economic stabilization would be enhanced and the competition among the

Repaying Your Student Loan Florida Coastal School of Law Workshop Objectives At the end of the workshop you will understand: What options are available during repayment What education-related tax incentives

STUDENT RIGHTS & RESPONSIBLITIES Students seeking Direct Loans must first complete the Free Application for Federal Student Aid (FAFSA), which can be submitted online at www.fafsa.ed.gov. There are two

TOTAL AND PERMANENT DISABILITY DISCHARGE Self-Help Packet GETTING STARTED GETTING STARTED You can cancel your federal student loans based on a permanent and total disability. All federal loan borrowers

Terms and Conditions of Title IV, HEA Loans Under applicable state law, except as preempted by federal law, you may have certain borrower rights, remedies, and defenses in addition to those stated in the

Discharging the Loan If a doctor of medicine or osteopathy, legally authorized to practice in a state, certifies that the borrower is totally and permanently disabled, the borrower s obligation to repay

Default Issues in Detail Since most of your current students will be eligible for inschool deferment if they re attending at least half-time, you are most likely to be involved in default issues with students

Car Title Loans What is a car title loan? When you take out a car title loan, you are borrowing money and giving the lender the title to your car as collateral. This means that the lender can repossess

What You Need To Know About Student Loans Copyright April 2002, Legal Aid Society of Hawai i All rights reserved. These materials may not be reproduced without written permission of the Legal Aid Society

Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Unfair or Deceptive Acts or Practices by State-Chartered Banks March 11, 2004 Purpose The Board of Governors of the

USOBA Best Practice Checklist Company and Location Date SMO General USOBA Member Standards: Consumer Debt Negotiation Companies - ALL Member shall provide a toll-free communication system, staffed to service

Private loan basics Private student loans are non-federal loans. Private Loan Guide You should only borrow private loans to fund your education as a last resort. Do all of the following before you consider

MOTOR VEHICLE TITLE LENDING IN THE COMMONWEALTH OF VIRGINIA BORROWER RIGHTS AND RESPONSIBILITIES Please take the time to carefully review the infonnation contained in this pamphlet. It is designed to advise

To preserve competition among mortgage lenders, provide relief from unnecessary regulatory requirements on responsible community mortgage lenders, and for other purposes. introduced the following bill;

GENERAL ASSEMBLY OF NORTH CAROLINA 1991 SESSION CHAPTER 546 HOUSE BILL 22 AN ACT TO REGULATE REVERSE MORTGAGES. The General Assembly of North Carolina enacts: Section 1. Chapter 53 of the General Statutes

North Dakota University System Student Loan Service Center 800-698-7397 slsc.ndus.edu ndus.slsc@ndus.edu The Student Loan Service Center, Fargo, ND was created in 1995 to assist the NDUS colleges and universities

Upon Graduation You re ready to move on. You re done with school (temporarily or permanently) and ready for the real world. Part of that means preparing for your student loan repayment. Today we ll cover

Chapter 24 Title Lending Registration Act Part 1 General Provisions 7-24-101 Title. This chapter is known as the "Title Lending Registration Act." 7-24-102 Definitions. As used in this chapter: (1) "Nationwide

TOTAL AND PERMANENT DISABILITY DISCHARGE Self-Help Packet GETTING STARTED GETTING STARTED You can cancel your federal student loans based on a permanent and total disability. All federal loan borrowers

Strategies When You Can't Pay Student Loans You've been repaying your student loan faithfully for five years but, all of sudden, things have taken a turn for the worse. You've been laid off from your job

Testimony of Lauren Asher Associate Director, Project on Student Debt Before the U.S. Department of Education, Office of Postsecondary Education In Response to the October 22, 2007 Notice of Negotiated

Important Notice: This Borrower s Rights and Responsibilities Statement provides additional information about the terms and conditions of the loans you receive under the accompanying Federal Direct PLUS

THE WHITE HOUSE Office of the Press Secretary For Immediate Release March 10, 2015 March 10, 2015 MEMORANDUM FOR THE SECRETARY OF THE TREASURY THE SECRETARY OF EDUCATION THE COMMISSIONER OF SOCIAL SECURITY

NEW YORK STATE DEPARTMENT OF FINANCIAL SERVICES PROPOSED 23 NYCRR DEBT COLLECTION.1 Definitions. For the purposes of this Part: (a) Clear and conspicuous means that the statement, representation or term

RETURN THIS PAGE Federal Direct Consolidation Loan Application and Promissory Note WARNING: Any person who knowingly makes a false statement or misrepresentation on this form or any accompanying documentation

Collections After Compliance The Changing Landscape An Experian Perspective The current financial situation is a result of many factors, including the actions of both large and small financial institutions,

Public Act No. 15-162 AN ACT CONCERNING A STUDENT LOAN BILL OF RIGHTS. Be it enacted by the Senate and House of Representatives in General Assembly convened: Section 1. (NEW) (Effective October 1, 2015)

Grace Period and Repayment Guide for Stafford and Direct Loans Communication is key! This guide session covers loans from the following programs: Federal Family Education Loan Program (FFELP) Federal Stafford

Repaying Student Loans If you are daunted by the prospect of having to make student loans payments for the next ten or so years, you are not alone. Student loan debt can be fairly large, and the monthly

The Ins and Outs of Student Loan Repayment: Understanding the Options Learning objectives You will learn to assist students to: Take inventory of their federal student loans Explore repayment plan available

Source: http://www.lexisnexis.com/hottopics/tncode/ 47-30-101. Short title. This chapter shall be known and may be cited as the "Home Equity Conversion Mortgage Act." HISTORY: Acts 1993, ch. 410, 2. 47-30-102.